Transparency In Ministry

Scenario: Pastor Brown is 63, retired and currently receives social security benefits. He is a member of the “community” church. In February 2007, the “community” church hired Pastor Brown to be the pastor of visitation and outreach and his annual compensation will be $27,500.

Question? How does the change in employment status affect the pastor’s social security benefits?

Because Pastor Brown has not reached his full retirement age, his social security benefits that he is receiving will be reduced. If he earns more than $12,960 his benefits will be reduced by $1 for every $2 that he earns.

His benefits will be reduced as follows:

Annual compensation $27,500
Less: Allowable income 12,960
Excess compensation 14.540
Benefits reduced (Divide by 2) 7,270

Social security benefits will be reduced by $7,270 in 2007.

Until Pastor Brown reaches the age of 66, his social security benefits will be reduced based on the maximum income allowed for those benefits. Currently the annual maximum earned income level is $12,960.

If Pastor Brown is 68, retired and called back into ministry and receives an annual compensation of $27,500. His social security benefits will not be reduced because he has reached the full retirement age of 66.

April 2 Deadline for taking your first required IRA distribution if you turned 70½ in 2006. Unless you're still working, this deadline also applies to your other retirement accounts (except for Roth IRAs).

April 2 Deadline for payors who file electronically to file 2006 information returns (such as 1099s) with the IRS.

April 2 Deadline for employers who file electronically to send copies of 2006 W-2s to the Social Security Administration.

April 17 Individual income tax returns for 2006 are due.

April 17 2006 calendar-year partnership returns are due.

April 17 2006 annual gift tax returns are due.

April 17 Deadline for making 2006 IRA contributions.

April 17 Deadline for employers to make contributions to certain retirement plans.

April 17 First installment of 2007 individual estimated tax is due.

NOTE: Businesses are required to make federal tax deposits on dates determined by various factors that differ from business to business.

Payroll tax deposits: Employers generally must deposit Form 941 payroll taxes (income tax withheld from employees' pay and both the employer's and employees' share of social security taxes) on either a monthly or semiweekly deposit schedule. There are exceptions if you owe $100,000 or more on any day during a deposit period, if you owe $2,500 or less for the calendar quarter, or if your estimated annual liability is $1,000 or less.

Monthly depositors are required to deposit payroll taxes accumulated within a calendar month by the fifteenth of the following month.

Semiweekly depositors generally must deposit payroll taxes on Wednesdays or Fridays, depending on when wages are paid.

For more information on tax deadlines that apply to your business, contact our office.

In a March 2007 notice, the IRS specified forty tax positions that will be treated as frivolous. Taxpayers who make these arguments in order to keep from paying taxes will be subject to a new $5,000 penalty. Four IRS Revenue Rulings were issued to accompany this IRS warning. The rulings targeted the major frivolous positions taxpayers (and often unscrupulous tax preparers) take, including the following claims:

$ - Wages are not taxable income.

$ - Filing returns and paying taxes are voluntary.

The IRS must provide taxpayers with a "summary record of assessment" before it can collect overdue taxes. The government cannot impose federal income taxes on those claiming to be a citizen of a state rather than of the United States, or who claim not to be a "person" as defined by the tax code.

IRS Commissioner Mark Everson cautioned taxpayers not to fall for schemes claiming to eliminate tax liability. He pointed out that people are "ultimately responsible for what is on their tax return even if some unscrupulous preparer has steered them in the wrong direction."

Count the Cost.

Will you be among the thousands of taxpayers who get a big tax refund this year? While most Americans happily accept their tax refund checks, smart taxpayers understand that refunds actually cost them money. Here’s why:

<1> The government pays no interest on refunds. Kept in your hands, those dollars could have been productive. For example, you could have invested the money or used it to pay off your debt during the year. If the money had been added to a 401(k) plan, tax would have been deferred on both the investment and its earnings. Even better, your employer might have matched all or part of your investment, adding to your retirement savings.

<2> Refunded cash is not available for use until actually received. Even though most taxpayers get their checks promptly, circumstances or errors can delay (or stop) a refund.

To prevent losing money on tax refunds, see post #2.

"Neither a borrower or lender be.."

If you are among the thousands of taxpayers who get a big tax refund this year, do you understand that by obtaining a refund, you have loaned money to the IRS. For some, not a bad deal, especially if it is a minimal amount. For others we might choose to utilize those funds for current operating or investing opportunities.

To prevent losing money on tax refunds, consider reducing your withholding or estimated tax payments. For most taxpayers, withholding must equal either the prior year’s tax or 90% of the current year’s liability. If your annual income changes little, it’s relatively easy to avoid overwithholding. You should consider filing a revised Form W-4 withholding statement with your employer if you’re having too much withheld.

For taxpayers with fluctuating income or multiple sources of income, the problem is more complex. The IRS provides a worksheet with Form W-4, but many people find the form complicated. If you’d like assistance adjusting your withholding, contact our office.

Remember the New Testament scripture Acts 20:35 "...it is more blessed to give than to receive"?

Remember reading about Warren Buffett’s $43.5 billion donation to charity? In 2006, the rich not only got richer, they followed Buffett’s lead and donated a record amount to charitable causes (churches and other exempt organizations).

According to The Chronicle of Philanthropy, there were 21 donations of $100,000,000 or more made by individuals in 2006. The 60 most generous givers (excluding Buffett) donated $7,000,000,000 (yes, seven billion) in 2006.

P.S. Romans 12:8 or 2 Cor. 9:7
Sorry for "preaching" today.

Mention the words “employee benefits” to a church or ministry and you might hear the groans of someone burned by sky-rocketing costs and mind-numbing complexity. But one type of benefit — a retirement plan — need not be a stress-inducing perk. In fact, it might just be the powerful tool you’ve been looking for to retain employees.

While choosing a retirement plan can be complicated, the underlying concepts are not. The best plan for you will depend on the employee's personal retirement needs, the size of your church or ministry, and how you wish to motivate your employees. Here are a few of the most popular plans available.

401(k) plan/403(b). The 401(k)/(403(b) is the workhorse of the retirement world, offering attractive flexibility to employers and employees. Up to 25% of compensation or $45,000 ($50,000 if over 50) can be paid into an employee’s account. The Church has the option to match employee contributions and specify when the benefits are vested. The downside to all this flexibility is high cost. Those with fewer than 20 employees may find other plans more economical.

Simplified Employee Pension Plan (SEP IRA). The SEP IRA was designed to give smaller churches/ministries a low cost alternative to the 401(k). Unlike the 401(k), however, employees cannot contribute a portion of their own pay. What’s more, vesting is immediate, and the same percentage of salary that is contributed to the senior pastor's account must be paid to each eligible employee’s account. On the plus side, the maximum contribution limit is the same as a 401(k), and contributions can vary from year to year. So, if you have a lean year, you can reduce your contributions accordingly.

SIMPLE IRA. Another option is the SIMPLE IRA. Designed for churches/ministries with 100 or fewer eligible employees, the SIMPLE IRA permits worker contributions of up to $10,500 ($13,000 if over 50), plus a mandatory employer match of up to 3%. The SIMPLE IRA is often viewed as a good entry-level retirement plan. One drawback is the lower contribution limits compared to a SEP IRA or 401(k), which may hinder an individual's retirement needs.

So which retirement plan is best for you? The answer will require careful analysis. But whether your time frame is near or far, or your business large or small, the good news is that more retirement options are available today than ever before. Give us a call to find the plan best suited for you and your business.

According to the Federal Reserve, debit card use has now surpassed credit card use. Unfortunately, debit card fraud has also grown, reaching $662 million in 2005, a 21% increase from the previous year.

Though debit cards are convenient to use, they put churches/ministries at greater financial risk for two reasons: (1) the cards directly access a church's bank account, so your money can be withdrawn by scam artists, and (2) debit cards don’t provide the same legal protection against fraud that comes with credit cards.

To help protect your Church when using a debit card, heed the following tips:

# - Periodically check the ATM or card-reader for signs of tampering (tape, loose connections, etc.). If you have assigned several ATM's to associate pastors, periodically review those cards for unusual tampering signs.

# -Remind your users to check for hidden cameras before entering your PIN, and shield your fingers on the keypad.

# - Check your bank and credit statements carefully.

If you suspect fraud, close the account immediately.
Remind your staff to not let the card be out of thier sight, especially at gas stations, restaurants, or convenience stores where the card’s data could be copied and used by scam artists.

Report errors, no matter how small, to the financial institution that issued the card.